Opinion by BATTAGLIA, J.
We are asked to consider whether an agreement entered into during the course of a marriage made manifest by three deeds by which title was transferred to the wife, Ann McGeehan, Petitioner, by her husband, Michael McGeehan, Respondent, was sufficient to exclude those properties from consideration as marital property under Section 8-201(e) of the Family Law Article of the Maryland Code (1984, 2012 Repl. Vol.).
McGeehan v. McGeehan, 451 Md. 580 (2017).
In October of 2014, Ann and Michael McGeehan separated after an eighteen year marriage, during which they had eight children. Two months later, Mr. McGeehan filed for divorce in the Circuit Court for Howard County, and an acrimonious debate ensued, which culminated in a divorce in December of 2015. The one year battle consumed volumes of the record, but our analysis will be focused on only that which engenders the discussion of three pieces of real property: property located on Embassy Park Road in Washington, DC ("Embassy Park"), purchased in December of 1998 and titled initially in both names as tenants by the entirety; another property located in Mason Neck, Virginia ("Mason Neck"), purchased in 2000 and titled initially in the husband's name; and property located on Farside Road in Ellicott City, Maryland ("Farside"), purchased in 2002 and titled as tenants by the entirety.
A fourth property located at Log Jump Trail in Ellicott City, Maryland ("Log Jump"), purchased in September of 2013 by the McGeehans and titled as tenants by the entirety is relevant, because proceeds of sales of the Farside and Embassy Park properties apparently were rolled into the Log Jump purchase. Only the Log Jump and Mason Neck properties were owned by the parties at the time of their divorce.
The present dispute between the parties before us was queued up in April of 2005 when a series of events occurred that were encapsulated by the Circuit Court Judge in her findings:
The judge then discussed Mr. McGeehan's stock trading, which ultimately lead to the April 2005 real property transactions:
The judge then described the circumstances of the transfer in April of 2005 that lead to this embroilment:
The judge also found that, "All of the premarital funds had been co-mingled at that point."
The gravamen of the question raised by Ms. McGeehan, however, arises as a result of the judge's determination that the Mason Neck property retitled in 2005 to Ms. McGeehan's name was marital property:
The Judge also determined that the Log Jump property, titled as tenants by the entirety upon purchase, was marital property, without any discussion of whether any portion of it was excluded by valid agreement or any consideration of its financial underpinnings or source of funds
The "gift deed" executed and recorded in 2005 between the McGeehans with respect to the Mason Neck property conveyed the property to Ms. McGeehan as her "sole separate and equitable estate":
The "gift deed" conveying the couple's Embassy Park property to Ms. McGeehan similarly provided that the property would be "her sole separate and equitable estate":
With respect to the Farside property, the deed transferring the property from "Husband and Wife to Wife"
At trial, Ms. McGeehan testified that the Embassy Park property was sold in "2012 or 2013," and the proceeds from that sale yielded "a little bit more than $400,000.00":
Ms. McGeehan further testified that Farside was sold in 2014, and the proceeds of Embassy Park and Farside were used to purchase Log Jump:
The issue raised by Ms. McGeehan before us is, thus, queued up. Did the 2005 Mason Neck gift deed from Mr. McGeehan act not only to transfer title to Ms. McGeehan but also to remove Mason Neck from consideration as marital property? Likewise, did the 2005 deeds from husband to wife relating to Embassy Park and Farside make them nonmarital property, such that their subsequent sales and contribution of their proceeds to the purchase of Log Jump render any portion of the value of Log Jump nonmarital? Although both parties present the decisions by the Court of Special Appeals in Golden v. Golden, 116 Md.App. 190 (1997), and Falise v. Falise, 63 Md.App. 574 (1985), as dispositive to our analysis, we, as will be seen, disagree.
Before the Court of Special Appeals, Ms. McGeehan raised a number of issues, among which she argued that Circuit Court Judge had erred in classifying Mason Neck and, implicitly, Farside as marital property because there was a "valid agreement" under Section 8-201(e) of the Family Law Article excluding the two pieces of real property from marital property.
The Court of Special Appeals agreed with Mr. McGeehan and relied on the trial court's rationale for its observation that:
McGeehan v. McGeehan, September Term, 2015, No. 2445, at 13-14 (October 26, 2016).
Before us, Ms. McGeehan argues that the trial court misapplied Golden and Falise to require that the deeds needed to specify that the properties would be nonmarital and that the words "sole" and "separate" as well as "sole owner" contained in the deeds were not sufficient to exclude the properties from marital property. Mr. McGeehan, on the other hand, maintains that the transfers of the three properties to Ms. McGeehan did not constitute a valid agreement to exclude any portion of the value of the properties or proceeds from the sale of the properties from the marital cauldron, because the deeds and oral agreements were not specific enough to exempt them from marital property.
The gravamen of the Maryland property division scheme upon divorce is an attempt to ensure that the value of both real and personal property is distributed in a fair and equitable manner. Cynthia Callahan & Thomas C. Ries, Fader's Maryland Family Law § 13-2 (6th ed. 2016).
Section 8-205 of the Family Law Article.
Section 8-201(e) of the Family Law Article defines "marital property," provides that real property titled as tenants by the entirety is marital property, unless excluded by valid agreement, and also allows all other property "excluded by valid agreement" to be excluded from marital property:
The statute, however, does not define what constitutes a "valid agreement."
What is now the language of Section 8-201(e)(3)(iii) of the Family Law Article, providing that property "excluded by valid agreement" is nonmarital, was enacted as part of the Maryland Property Disposition in Divorce and Annulment Act (the "Marital Property Act") by the General Assembly in 1978, which established our current statutory regime providing for the disposition of property in a divorce. 1978 Maryland Laws, Chapter 794. The language had been recommended by the Governor's Commission on Domestic Relations Laws (also known as the "Groner Commission," named after its chairperson Beverly Groner), appointed in 1976, in part, to propose changes to the Maryland laws governing the disposition of property in divorce. Report of the Governor's Commission on Domestic Relations Law, at 2 (1978).
With respect to the definition of "marital property," the Groner Commission recommended only one exclusion from the definition of marital property, that being property "excluded by valid agreement." Id. at 7. The Report of the Groner Commission, however, did not include any reference to where the language of valid agreement was derived, nor define what a "valid agreement" was. Id.
The General Assembly in Chapter 794 of the Maryland Laws of 1978 did follow the lead of the Groner Commission and provided that "property excluded by valid agreement" was not marital property, which was codified at Section 3-6A-01(e) of the Courts and Judicial Proceedings Article of the Maryland Code (1974, 1979 Supp.), with the addition of other exclusions:
1978 Maryland Laws, Chapter 794.
One commentator at the time noted the significance of "permit[ting] the exclusion of property from the provisions of the statute if governed by a valid agreement," which elevated the role that antenuptial contracts would have in resolving property disputes upon divorce. Paula Peters, Property Disposition Upon Divorce in Maryland, 8 U. Balt. L. Rev. 377, 409 n.201 (1979) (noting that "practitioners should consider increased counseling and education in the field of antenuptial agreements" as a result of the enactment of the statute). This Court also recognized that as a result of the enactment of the "valid agreement" language, parties could "control the distribution of property upon divorce" through antenuptial agreements:
Frey v. Frey, 298 Md. 552, 562 (1984).
In 1994, the General Assembly, in response to our decision in Grant v. Zich, 300 Md. 256 (1984), added a provision to the statute that real property held by spouses as tenants by the entirety is marital property, unless "excluded by valid agreement"
1994 Maryland Laws, Chapter 462. In so doing, the General Assembly intended to overrule Grant v. Zich, according to its bill analysis:
Senate Judicial Proceedings Committee, Bill Analysis of Senate Bill 41 (1994).
In abrogating Grant v. Zich, the General Assembly adopted the presumption that a tenancy by the entirety property was marital and could only be excluded as nonmarital by the execution of a valid agreement. Its value relative to the monetary award would continue to be subject to the rubric of Section 8-205(b) of the Family Law Article of the Maryland Code (1991 Repl. Vol., 1995 Supp.), to which was added a new factor in the same legislation.
In so doing, the General Assembly recognized the importance of the legal analysis of a valid agreement to determine exclusion, rather than an initial analysis of the source of funds. Since the introduction of what is now Section 8-201(e)(2) of the Family Law Article, the Court of Special Appeals has decided in Brown v. Brown, 195 Md.App. 72, 107 n.18 (2010), in the only reported opinion addressing the validity of an agreement under that section, that a jointly filed statement under Maryland Rule 9-207
Each party before us, however, asserts that two cases, Falise and Golden need to be considered to determine what the General Assembly intended in adopting the language of valid agreement in Section 8-201(e)(3)(iii) of the Family Law Article. In Falise, the Court of Special Appeals considered whether a clause in a separation agreement that excluded real property acquired after separation, but before the divorce, was valid, in the context of a husband having purchased property in his own name during that period, reconciling with his wife, and retitling the property as tenants by the entirety. The separation agreement in issue had provided that both spouses agreed to waive "all rights, title, interest and claims which said parties might now have or may hereafter have as the husband, wife . . . or otherwise, in and to any property, real or personal, that either of said parties may own or hereafter acquire. . . ." Falise, 63 Md. App. at 578 n.1. The agreement had been executed prior to the enactment of the Marital Property Act.
Attempting to address whether the separation agreement clause in issue constituted a valid agreement to exclude the property from consideration as marital property, the Court of Special Appeals observed that, "the parties intended to relinquish any and all right, title and interest in and to the other's property, then owned or thereafter acquired." Id. at 580. Regardless of the parties' intentions, however, our intermediate appellate court emphasized that the clause in the separation agreement could not anticipate the passage of the Marital Property Act. As a result, then, the Marital Property Act was in play, and the absence of reclassification language of the property as nonmarital was determinative that a valid agreement to exclude did not exist:
The holding in Falise then followed: "In order to exclude property `by valid agreement' from the reach of a monetary award, we believe that the parties must specifically provide that the subject property must be considered `non marital' or in some other terms specifically exclude the property from the scope of the Marital Property Act." Id. at 581. In so doing, the Court of Special Appeals enmeshed the notion of reclassification of the property as nonmarital into its interpretation of the language of valid agreement,
One such disparate result was occasioned in Carsey v. Carsey, 67 Md.App. 544, 553 (1986), in which the Court of Special Appeals evaluated whether a trial court's determination that a valid agreement existed to exclude property from marital property in favor of the wife, after the husband had provided a letter to her by which "all properties assigned jointly or under my name singularly are Nancy S. Carsey's privilege to dispose of as she wishes," provided that wife took on the "responsibility for liabilities related to that estate." Our intermediate appellate court agreed that a valid agreement "respecting the ownership of property which by its terms justified a finding of no marital property," id. at 552, existed, contrasting Falise and applying traditional contract principles of offer, acceptance, consideration, and intent, as well as knowledge of the assets and voluntariness in its analysis:
Id. at 553-54.
In Thomasian v. Thomasian, 79 Md.App. 188 (1989), however, our intermediate appellate court considered whether property acquired during the couple's separation, but before divorce, and titled in husband's sole name was marital, although it was unclear from the trial court's ruling whether it had considered that property as marital or nonmarital. The Court of Special Appeals noted, relying on the language of Falise, that, "In order to be effective, the agreement must be sufficiently specific as to make clear that the property is to be `non marital' or, in some other terms, specifically exclude the property from the scope of the Marital Property Act." Id. at 203. Observing that, the "record does not reflect any such agreement," id., the court remanded the issue to the trial court.
In Harbom v. Harbom, 134 Md.App. 430 (2000), the Court of Special Appeals considered the validity of a separation agreement, as well as of a postnuptial agreement and an antenuptial agreement, to exclude property as nonmarital, as discussed more fully infra. With respect to the separation agreement, our intermediate appellate court considered whether real property, purchased with funds that wife had received from husband in exchange for her one-half interest in their jointly owned real property, after their separation but before divorce, was nonmarital, pursuant to a valid agreement to exclude. In determining that the agreement to exchange was a valid agreement to exclude, the Court of Special Appeals did not rely on the Falise tenets, but determined: "The exchange between the parties was a distribution of property intended to be separate from any judicial determination of a monetary award. Consequently, the court did not err in classifying these properties as nonmarital." Id. at 454.
In Flanagan v. Flanagan, 181 Md.App. 492 (2008), our intermediate appellate court considered whether property not identified in the couple's joint statement of marital and nonmarital property, but discussed during trial, was marital, such that it should have been considered in the calculation of the total value of marital property. The joint statement had only identified four items of marital property but contained a clause that stated, "The parties agree that all issues with regard to the remaining property that they hold have been resolved." Id. at 499. Observing that the trial court had not erred in calculating the value of parties' marital property based on the four items identified in the joint statement, the Court of Special Appeals interpreted the clause as affecting a valid exclusion from marital property with respect to any remaining property, even though the property had not been classified as nonmarital:
Id. at 531-32 (citation omitted).
It certainly goes without saying that the Court of Special Appeals in the instant case applied the Falise rationale requiring language of reclassification of the property as nonmarital to effect an exclusion from marital property, even though we are not dealing with a separation agreement. It is not a given, however, that Falise should be applied in the context of a postnuptial agreement, as in the present case, as we shall discuss.
Before discussing antenuptial and postnuptial agreements, however, we turn to Golden, the second case highlighted by the parties. In Golden, the Court of Special Appeals only decided that the trial court had erred in finding the existence of an oral agreement entered into premaritally that essentially iterated "what was hers was hers and what was mine was mine," based upon conduct that showed "before and after marriage, these parties, with the exception of the joint account for household expenses, handled their money and their investments as though unmarried." Golden, 116 Md. App. at 193.
Our intermediate appellate court in Golden disagreed and posited, "We perceive that the finding of an oral property settlement agreement was erroneous. We perceive of nothing in the testimony or evidence in this case that would constitute an agreement sufficient to bind the parties to it or to support the trial judge's finding." Id. at 201-2. Judge Dale Cathell, writing for the Court, also observed that it would be unlikely that any oral agreement between a husband and wife that "what is hers is hers and what is mine is mine" could ever contain the degree of specificity referenced by Falise:
Id. 203 (emphasis added). Although Golden went on in dicta to explore what should occur on remand, its central holding regarding the lack of a valid agreement, because of insufficiency of evidence supporting the existence of such, is not apposite in the instant case, because the trial court judge did find that, "It would seem that it was the parties' mutual agreement that the property would be wife's property," although she immediately obviated that finding by requiring the Falise classification language.
To return to the main issue, however, there are, generally, three different types of agreements that can be entered into in order to effect property disposition between spouses upon divorce, the separation agreement, the antenuptial agreement, and the postnuptial agreement.
An antenuptial agreement, also referred to as a premarital or prenuptial agreement, is entered into by prospective spouses prior to marriage and "settl[es] in advance alimony or property rights of the parties upon divorce." Cynthia Callahan & Thomas C. Ries, Fader's Maryland Family Law § 14-2. One commentator has noted that prospective spouses will often enter into antenuptial agreements for the protection of their assets and property rights:
Gail Frommer Brod, Premarital Agreements and Gender Justice, 6 Yale J. L. & Feminism 229, 238-40 (1994) (footnotes omitted).
An antenuptial agreement is interpreted according to the objective theory of contracts and subject to traditional contract defenses, such as fraud, duress, coercion, mistake, undue influence, incompetency, or unconscionability at the time the agreement was entered into. Cynthia Callahan & Thomas C. Ries, Fader's Maryland Family Law §§ 14-1, 14-2[b]. Unlike other contracts, however, a "confidential relationship exists between the parties, as a matter of law" in an antenuptial agreement. Id. § 14-2(b). To establish the validity of an antenuptial agreement, however, its proponent must show that there was no "overreaching," requiring an exploration of "whether in the atmosphere and environment of the confidential relationship there was unfairness or inequity in the result of the agreement or in its procurement." Id.
The absence of overreaching may be established by showing that there was a "frank, full and truthful disclosure of [each party's] respective worth in real and personal property so that `he or she who waives can know what it is he or she is waiving.'" Id. Even when no disclosure has been made, the party seeking to enforce the antenuptial agreement may prove that overreaching did not occur by showing that the challenging party had "adequate knowledge of the existence of the assets subject to the waiver and knowledge of what those assets are worth in sum so that the attacking party knows what he or she is waiving." Id. § 14-2(e). Alternatively, the validity of an antenuptial agreement may be proved if the challenging party was not prejudiced by the lack of disclosure or knowledge, which is proven by showing that the "benefit to the waiving party was commensurate with what he or she relinquished such that the agreement was fair and equitable and/or . . . the party attacking the agreement entered into the agreement freely and understandingly." Id. § 14-2(b).
In Herget v. Herget, 319 Md. 466 (1990), we considered the effect of an antenuptial agreement, which was entered into prior to the effective date of the Marital Property Act, on the wife's allegation that she was entitled to a monetary award under the statute. The language of the antenuptial agreement at issue provided that the wife had
Id. at 469. We accepted the trial court's finding that the antenuptial agreement was valid and that "the plain language of the agreement evidenced the intent of both parties to exclude and protect the property of each from any and all claims of the other that might arise out of their relationship as husband and wife." Id. at 468.
We parted ways with Falise, however, in determining that the wife's release did encompass any claims to an award under the Marital Property Act, a result contrary to that which was decided in Falise, when we said:
Id. at 473-76. In so doing, we questioned the efficacy of Falise and validated the antenuptial agreement by using contract principles to interpret its language and the parties' intent.
The Court of Special Appeals in Harbom, 134 Md. App. at 438, also considered the validity of an antenuptial agreement in the context of a divorce in which each party had waived "any right or claim . . . in the property of [the other party, including] all future growth, interest, . . . or changes in assets, traceable to [the other party's] current ownership of the property." In considering whether the antenuptial agreement was invalid, based on the husband's failure to disclose the value of his assets to the wife prior to its execution, the court applied the traditional test, heretofore articulated, for antenuptial agreements:
Id. at 444. In consideration of these principles, the intermediate appellate court affirmed the trial court in its determination that the antenuptial agreement was valid, because, though the value of the assets had not been disclosed, the wife "had reasonably good understanding of what she was giving up." Id. at 449.
In each of the cases that we have found which involved an antenuptial agreement affecting the disposition of property in divorce, issued after the advent of the Marital Property Act, the traditional notions governing the evaluation of such agreements have been applied to govern the division of property and its value, without any reference to the reclassification language of Falise.
"[S]imilar to an antenuptial agreement" is a postnuptial agreement that is "a contract—in this instance between a married couple—that sets forth the rights, duties and responsibilities of the parties during and upon termination of the marriage through death or divorce." Cynthia Callahan & Thomas C. Ries, Fader's Maryland Family Law § 14-15. As such:
Sean Williams, Postnuptial Agreements, 2007 Wis. L. Rev. 827, 835 (2007). Williston has observed that "property settlements or other postnuptial agreements, whether in contemplation of divorce or otherwise, are generally held to be binding when they are shown to be fair and regular and not unconscionable or the product of fraud, duress, mistake or undue influence; and certainly when they have been fully executed they will be given effect." 7 Williston on Contracts § 11:7 (4th ed. 2017).
The validity of an agreement affecting property and its division upon divorce was considered in Harbom, 134 Md. App. at 451, in which the creation of an individual retirement account ("IRA") under the wife's name with the husband's funds during their marriage was held to constitute a valid agreement under Section 8-201(e)(3)(iii) of the Family Law Article (1984, 1999 Repl. Vol.) to exclude that property as nonmarital. The Court of Special Appeals iterated that in order to establish that the IRA was not marital property, proof of "donative intent, delivery or relinquishment of dominion, and acceptance (which is presumed in the absence of evidence to the contrary)" was required; the requisite donative intent would be the "intention to give or relinquish the contingent equitable claim that arises from the marital/nonmarital status of the property." Id. at 452. Applying, thus, only a gift analysis, the intermediate appellate court, without any mention of Falise and its reclassification requirement, excluded the lRA from marital property and "classified" the IRA as nonmarital:
Id. at 452-53.
In Newborn v. Newborn, 133 Md.App. 64 (2000), the Court of Special Appeals considered the trial court's finding that a postnuptial agreement did not exist between husband and wife, where proceeds from the husband's personal injury settlement, which had included a claim for loss of consortium, were distributed 95% to the husband and 5% to the wife into separately titled accounts during their marriage. Agreeing with the trial court that no agreement existed, our intermediate appellate court explained that there was no proof of an agreement to exclude those funds as nonmarital property:
Id. at 82. The court went on to consider whether the funds from the personal injury settlement constituted marital property and remanded the issue to the circuit court to permit proof by the wife of whether any part of the proceeds was marital.
Although the stable of postnuptial agreements in our jurisprudence in which a property disposition upon divorce is considered is relatively sparse, it is clear that none of the cases has applied the Falise reclassification requirement to determine the validity of the postnuptial agreement.
In the present case, the trial judge found that the 2005 agreement between Mr. and Ms. McGeehan made manifest by the transfer by deed of Embassy Park, Farside, and Mason Neck to Ms. McGeehan was made during the course of their marriage to appease her for the loss of her inherited stock portfolio:
With respect to the Mason Neck property, having already classified Log Jump as marital, the trial judge found that the parties intended that the property would be wife's. The judge then neutralized that agreement by requiring the Falise reclassification language.
In so doing, the trial judge obviated her central finding by requiring that the parties insert the reclassification language of nonmarital as mandated in Falise. In this, she erred; the Falise dictates are inapplicable to negate the McGeehans' postnuptial agreement to transfer Mason Neck and its value to the wife.
The bases for the trial judge's finding that it was the parties' "mutual agreement that the property would be wife's property" were the deeds that conveyed the property to the wife as her sole and separate property; the wife's discovery of her alienated inheritance; the simultaneous execution during the marriage of the deeds for Mason Neck, Farside, and Embassy Park; and the execution of a new will by Ms. McGeehan excluding Mr. McGeehan and Mr. McGeehan's waiver of his statutory share. The judge's finding of validity of the agreement is supported in the record and in our jurisprudence addressing validity of postnuptial agreements.
As a result, there was a valid postnuptial agreement to exclude Mason Neck as the nonmarital property of Ms. McGeehan. With respect to Log Jump, the trial judge, on remand, must initially consider whether there was a valid agreement to exclude Log Jump as nonmarital under Section 8-201(e)(2) of the Family Law Article. Absent such an agreement, the judge must then consider whether the source of funds for the purchase of Log Jump, based upon the testimony elicited that the proceeds of the sale of Farside and Embassy Park, which were transferred in 2005 to the wife, was traceable thereby to her contribution under Section 8-205(b)(8)-(9) of the Family Law Article.
Concurring Opinion by GETTY, J.
While I agree with the result reached today by the Majority, I would reach it on somewhat different grounds. Specifically, I would explicitly overturn the Court of Special Appeals' holding in Falise v. Falise, 63 Md.App. 574, 581 (1985), that "[i]n order to exclude property `by valid agreement' from the reach of a monetary award, [ ] parties must specifically provide that the subject property must be considered `non marital' or in some other terms specifically exclude the property from the scope of the Marital Property Act." Therefore, I respectfully concur.
Maryland Code, Family Law Article (1984, 2012 Repl. Vol.) ("FL") 8-201(e) provides that property that is acquired by one or both parties during a marriage, however titled, is generally considered "marital property." However the statute also sets forth several exceptions under which property acquired during a marriage by one or both parties is not considered "marital property." One of those exceptions is for property "excluded by valid agreement." FL 8-201(e)(2)-(3). One consequence of such an agreement to exclude real property that is held by one party to a marriage from being considered "marital property" is that, in the event of a subsequent divorce between the married parties, the excluded property would not be subject to a monetary award pursuant to FL § 8-205.
In this divorce action, the trial judge found that there was a "mutual agreement" between the parties, entered into during the course of their marriage, that Mr. McGeehan would "convey all his rights, title and interests" in the Mason Neck, Farside, and Embassy Park properties to Ms. McGeehan, so that those properties "would be wife's property." Maj. Slip Op. at 4-6. However, the trial judge ruled that the agreement was insufficiently specific to exclude the Mason Neck property from being "marital property," because the parties did not expressly state that the properties would be excluded from being considered as marital property in the future.
The practical effect of the trial judge's ruling that there was no valid agreement to exclude any of the properties from being "marital property" was that the properties at issue could be the subject of a "monetary award [ ] as an adjustment of the equities and rights of the parties concerning marital property." FL § 8-205. And, although not mentioned by the Majority, the trial judge did in fact grant a $230,000 monetary award to Mr. McGeehan. McGeehan v. McGeehan, No. 2445 Sept. Term 2015, 2016 WL 6299681, at *2 (Md. Ct. Spec. App. Oct. 26, 2016).
In reaching her ruling that there was no agreement to exclude the properties at issue from being marital property, the trial judge explicitly relied upon the Court of Special Appeals' opinions in Falise v. Falise, 63 Md.App. 574 (1985) and Golden v. Golden, 116 Md.App. 190 (1997), explaining,
Maj. Slip Op. at 4.
In Falise, the Court of Special Appeals addressed the significance of a separation agreement entered into by a married couple, the Falises. 63 Md. App. at 577. Several years into their marriage, the Falises separated and entered into a separation agreement which provided, in pertinent part, that the Falises would each "mutually release, waive, surrender and assign unto the other, his or her heirs, personal representatives and assigns, all rights, title, interest and claims which said parties might now have or may hereafter have as the husband, wife, widower, widow, next of kin, successor or otherwise, in and to any property, real or personal, that either of said parties may own or hereafter acquire[.]" Id. at 578 n.1. During the parties' separation, Mr. Falise acquired property titled in his name in Howard County. Id. at 577. The parties subsequently entered into a short-lived reconciliation, during which a house was built on that property titled in both parties' names as tenants by the entirety. Id. at 577-78. Ultimately, after the reconciliation broke down, Mr. Falise filed for divorce, which was granted by the trial court. Id. at 578. The trial judge found that the home held by the parties "was marital in part and nonmarital in part," but that "both monetary and non-monetary contributions of [Mrs. Falise were] nominal," and consequently granted a minimal monetary award of $2500 to Mrs. Falise. Id. at 579.
The Court of Special Appeals held that the separation agreement entered into by the Falises did not exclude the property subsequently acquired by Mr. Falise from being marital property. The intermediate appellate court offered two reasons for its holding. First, it suggested that "marital property" was not covered by the agreement because it was not an interest in real or personal property, explaining,
Id. at 580.
The Court of Special Appeals in Falise also reasoned that because the Marital Property Act did not exist at the time of the parties' agreement, Ms. Falise could not be deemed to have released a right that she did not have and could not have fairly anticipated. Id. at 580-81. The intermediate appellate court cited in support to the case of Smith v. Smith, in which the Supreme Court of New Jersey considered whether a similar mutual release in a separation agreement would prevent a trial court from making an equitable distribution during a divorce. 371 A.2d 1 (1977). That court noted that generally, under New Jersey law, "claims arising after the date of delivery of the instrument are not covered by it unless explicitly mentioned, since they would not appear to have been within the contemplation of the parties." Id. at 6. Because, at the time the couple entered into the separation agreement, New Jersey courts "had no power to make an equitable distribution of marital assets" the court held that the agreement "cannot be regarded as having released a right which [a party] did not have and could not fairly have anticipated." Id.
Consequently, the intermediate appellate court held that "[i]n order to exclude property `by valid agreement' from the reach of a monetary award, we believe that the parties must specifically provide that the subject property must be considered `non marital' or in some other terms specifically exclude the property from the scope of the Marital Property Act." Id. at 581.
Five years later, this Court in Herget v. Herget, 319 Md. 466 (1990) strongly disapproved of the Court of Special Appeals' reasoning behind the specificity requirement stated in Falise. In Herget, a couple had entered into an antenuptial agreement two days prior to their marriage, which stated that each party "waives and surrenders any and all claims she may have, now, or at the time of any termination of the proposed marriage between the parties," in the property of the other "now owned or hereafter acquired." 319 Md. at 469. A separate provision in the agreement stated that "each of the parties hereby waives and releases unto the other party, her or his heirs, next of kin, personal representatives and assigns, all of her and his respective rights, interests and claims in and to said property of the other[.]" Id. The parties subsequently divorced, and the wife contended that the agreement was invalid and, if valid, did not have the effect of barring her from receiving a monetary award. Id. at 467-68. The trial court found the agreement to be valid, but the Court of Special Appeals agreed with the wife that "the wife's claim for a monetary award was not barred by the terms of the agreement." Id. at 468. On appeal to this Court, "[t]he sole issue with which we [were] concerned [was] whether the agreement bars the wife's claim for a monetary award." Id. at 470.
We noted that the Court of Special Appeals had followed Falise, and held that "`the right to a monetary award . . . is not an interest in the estate or property of one's spouse,' and therefore is not covered by the language of the agreement." Id. at 471 (quoting Herget v. Herget, 77 Md.App. 268, 279 (1988)). We summarized the holding of Falise that "the separation agreement in that case, by which each party agreed to relinquish all right, title, and interest in and to the property of the other then owned or thereafter acquired, did not effect a release of the right to a monetary award." Id. We also noted the two reasons the Court of Special Appeals had offered to support the Falise holding: that the intermediate appellate court doubted such an agreement "`could affect the status of something which is neither an interest in real or personal property, i.e., marital property[,]'" and that "the wife could not be regarded as having released a right that she did not have and could not have fairly anticipated at the time the agreement was signed." Id. at 471-72 (quoting Falise, 63 Md. App. at 580).
Beginning our analysis with the second reason stated in Falise, we observed that the Court of Special Appeals had relied on New Jersey law stated in Smith v. Smith, 371 A.2d 1, 6 (1977), but held that law was "contrary to established Maryland law." Herget, 319 Md. at 473. We noted that in Bernstein v. Kapneck, 290 Md. 452 (1981), "this Court held that a broad general release of claims for injuries `known and unknown, and which have resulted or may in the future develop' sufficiently reflected the intent of the parties to release the defendant from any responsibility for a serious brain injury about which the parties neither knew or could reasonably have known at the time the release was executed." Herget, 319 Md. at 473 (quoting Bernstein, 290 Md. at 456). We therefore stated that we "reject the notion that the parties in the case before us were incapable of releasing a right that did not then exist." Id. We also stated a broader rule of law, namely, that "[w]e also reject the argument that general language cannot effect a full release of a specific right, even a right that is unknown at the time the agreement is drawn." Id.
We then considered the Court of Special Appeals' first reason in Falise, that a monetary award is not a "legal interest" in real property. We agreed that "the right to a monetary award does not carry with it a `legal interest' in the other party's property . . . in the sense of title." Id. at 475. However we regarded the conception of property rights and interest taken by the Court of Special Appeals as "overly narrow." Id. We stated that, under the Maryland Marital Property Act, "this Court has approved a broad definition of the term `property,'" explaining,
Id. (quoting Deering v. Deering, 292 Md. 115, 125 (1981)). We therefore determined that, as to the language of the agreement at issue, "in referring to mutual releases of all claims of rights or interests that each party might have or might thereafter acquire in and to any property of the other, these parties were using the term `property' in its broad sense." Id. at 475-76. And, we noted that as a general matter, a claim for a monetary award is simply "a claim against the property of the person from whom the award is sought." Id. at 476. For those reasons, we concluded "that the intent of the parties manifested by their antenuptial agreement was to prevent the very type of claim [for a monetary award] that is now being made." Id. at 477.
While some older opinions may become stale or surpassed by the gradual development of the law, others, grounded on firmer reasoning, remain compelling statements of the law even many years later. I believe that Herget is an example of a case whose reasoning remains sound, and should be applied to the instant appeal. The statutory language at issue in Herget, now contained in FL § 8-201(e), has not been substantially changed, and was in existence prior to the agreement entered into between the McGeehans. This Court still generally gives full effect to the language of a general release. See Brethren Mut. Ins. Co. v. Buckley, 437 Md. 332, 343 (2014).
Therefore, pursuant to Herget and the broader concept of property rights and interests described in that case, I would hold that the general release entered into by the McGeehans, under which Mr. McGeehan agreed to convey "all his rights, title, and interests" in the properties at issue to Ms. McGeehan, should be given full effect. And, I would hold that the release shows a clear intent to convey the property to Ms. McGeehan free of all claims from Mr. McGeehan, including any future claims by Mr. McGeehan that the property is marital property and subject to a monetary award.
Golden v. Golden, 116 Md.App. 190 (1997) is the second case on which the trial judge in the instant case relied. However, Golden is inapposite to the facts of this case. The Majority describes the holding in Golden,
Maj. Slip Op. at 23 (quoting Golden, 116 Md. at 201-202).
As the trial court's ruling is not supported by Golden, the resolution of this appeal turns on whether the trial judge was correct to rely on Falise to find that the parties' agreement did not apply to exclude Mason Neck, Farside, and Embassy Park from being considered "marital property" and the subject of a monetary award because the agreement did not specify that those properties would be considered non-marital or outside the scope of the Marital Property Act. The Majority holds that the trial court erred in so ruling because Maryland courts have not applied the holding in Falise, which involved a marital separation agreement, to the type of postnuptial agreement entered into by Mr. and Ms. McGeehan (or to antenuptial agreements). Maj. Slip Op. at 32.
Although I have no dispute with the Majority's conclusion that Falise has been narrowly applied, I believe that in light of our prior decision in Herget, a more straightforward way to resolve this appeal would be to simply overturn the holding in Falise that "in order to exclude property `by valid agreement' from the reach of a monetary award . . . parties must specifically provide that the subject property must be considered `non marital' or in some other terms specifically exclude the property from the scope of the Marital Property Act." 63 Md. App. at 581. And, having first overturned Falise, I would thereafter hold that, pursuant to Herget, the agreement entered into by the parties— that Mr. McGeehan would "convey all his rights, title and interests" to Ms. McGeehan— is a valid agreement to exclude that property as marital property under FL § 8-201(e).
PROPERTY ARTICLE OF THE ANNOTATED CODE OF MARYLAND." This statement apparently referred to Section 12-108(d) of the Tax Property Article of the Maryland Code (1985, 2001 Repl. Vol.), which provided, "An instrument of writing that transfers property between spouses or former spouses is not subject to recordation tax."
1984 Maryland Laws, Chapter 296.
1994 Maryland Laws, Chapter 462.
Section 4 of the Uniform Marital Property Act (1983) defined "individual," or nonmarital, property as including property acquired "by a decree, marital property agreement, written consent, or reclassification . . . designating it as the individual property of the spouse. . . ." The Uniform Act's provisions and commentary separate the interpretation of a valid agreement from the concept of reclassification, a term which is not a part of the Maryland statutory scheme.
In assessing the validity of marital property agreements, Section 10(f)-(h) of theUniform Marital Property Act (1983) suggested standards for enforcing marital property agreements made both during marriage and before marriage, based on various principles:
Reclassification, on the other hand, "is just what the word implies-it is a change in classification, generally from marital to individual or vice versa." Unif. Marital Property Act § 4 cmt. on classification (1983). Although the Act notes that "title does not function as a classification index," id., "the provisions of the Act do not require any particular form of labeling of title-documented property. . . ." Id. § 11 cmt.
In raising the dichotomy between what is a valid agreement and a reclassification, we leave for a more appropriate case whether Falise continues to be valid in the context of a separation agreement.
Reichert v. Hornbeck, 210 Md.App. 282, 361 (2013) (quoting Innerbichler v. Innerbichler, 132 Md.App. 207, 228 (2000)) (additional internal citations omitted). In making a determination as to whether it would be equitable to grant a marital award, and if so for what amount, a trial court must consider parties' marital and non-marital property. See FL § 8-205(b) (listing factors a trial court must consider in making a determination as to a marital award, including "the value of all property interests of each party"). However, a monetary award may only be awarded "as an adjustment of the equities and rights of the parties